Middle east: Pump it up

Middle east: Pump it up

Disappointing recovery in H1 2018

Regional real GDP growth disappointed in H1 2018, posting +1.1% y/y in Q1 and +1.7% in Q2. The recoveries were muted in Saudi Arabia, the UAE and Kuwait, with the latter’s performance in Q1 being sharply revised downwards to -0.5% y/y from an initial estimate of +1.6%. In Bahrain, GDP contracted by -1.2% y/y in Q1 owing to output cuts stemming from maintenance activities at the offshore Abu Sa’afah field but rebounded to +2.4% in Q2. Oman has not provided any GDP data for this year yet, but based on a -0.2% y/y decline in oil output in H1 we estimate that the whole economy expanded by just +0.9%. Only Qatar grew by more than +2% in H1 as the country rebounds from its 23-year growth low in 2017 which was due to due to the blockade by the GC3+1 (Saudi Arabia, UAE, Bahrain, Egypt).

Swings in OPEC agreements and oil output

At the end of June 2018, OPEC member states and a number of non-OPEC allies including Russia agreed to scale back their over-compliance with oil supply cuts that had been decided at the end of 2016 amid ongoing low oil prices at the time. The new agreement was projected to add close to 1 million barrels per day to the global market. In the GCC region, the move led to an estimated increase in average oil output per day by 0.55 barrels in July-August as compared to H1 2018. With regard to the original OPEC deal, this reflects a shift from over-compliance in H1 (109%) to under-compliance in July-August (37%). 

GDP growth forecasts after output increases in June and output reduction plans from November (* Q1 2018 for UAE and Oman)